Stripped Down Cotai

Goldman Sachs analyses the potential impact of the LVS construction delay

The analysts go into considerable detail on the impact of the LVS decision on Cotai, with projections based on short, medium or indefinite suspensions of work.

“On November 11, LVS announced that it has halted the development of its projects (Sheraton and Shangri-La hotels) due to the current difficult capital market conditions. It had not disclosed an updated schedule or timeline for these two and other projects originally scheduled in 2009-2012 (e.g. Hilton, Fairmont, Conrad, Raffles, Holiday Inn/Intercon, St Regis etc). As there is limited visibility as to how LVS would fund these projects and about its focus on Singapore in the next 1-2 years, we have removed its projects from our gaming model,” says the investment house.

“Originally, we estimated that these seven casino hotels [Hilton, Fairmont, Conrad, Raffles, Holiday Inn/Intercon, St Regis] would add 2,100 tables, 7,500 slot machines and 16,500 hotel rooms in the Cotai Strip.

“We expect 42% less table addition until 2012E and forecast 8% supply CAGR [compound annual growth] from 3Q08 until 2012E. We believe more balanced demand-supply dynamics should put less pressure on operators’ profitability over the long term,” states the report.